Tax season usually feels like a giant puzzle where the pieces don't quite fit. You're digging through receipts, staring at W-2s, and wondering why on earth you're paying so much in property taxes. Then you hear it. The SALT write off. It sounds like some kind of culinary deduction, but it’s actually one of the most debated, loathed, and loved parts of the U.S. tax code. Basically, it stands for State and Local Tax. It’s a way to keep the federal government from taxing you on money you already gave to your governor or mayor.
But there’s a catch. A big one.
Back in 2017, the Tax Cuts and Jobs Act (TCJA) changed everything. It put a "cap" on how much you can actually claim. If you live in a high-tax state like New York, California, or New Jersey, you probably felt that change deep in your wallet. It wasn't just a minor tweak; it was a total overhaul of how middle and upper-middle-class families look at their annual returns. Before the cap, you could deduct almost everything you paid in state income and property taxes. Now? You’re stuck with a hard limit.
Why the SALT Write Off is a Local Battleground
It’s about fairness. Or at least, the perception of it. When you use a SALT write off, you are essentially reducing your taxable income on your federal return by the amount you’ve already paid in state and local taxes. This includes state income taxes (or sales taxes, you have to pick one) and property taxes on your home.
Why does this matter? Well, think about it this way. If you earn $100,000 and your state takes $10,000, and then the federal government taxes you on the full $100,000, you’re being taxed on money that isn't even in your pocket anymore. It’s "taxing a tax."
The $10,000 Wall
Since 2018, the maximum amount you can deduct for SALT is $10,000. That’s for individuals and married couples filing jointly. If you’re married but filing separately, it’s even lower—just $5,000 each. For someone in a rural area where property taxes are $2,000 a year, this cap doesn't matter much. But if you’re in a Westchester County suburb where property taxes alone are $25,000? You’re losing out on a massive chunk of potential deductions. Honestly, it’s been a point of massive political friction for years.
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The Specifics: What Can You Actually Deduct?
You can’t just throw every local fee into the mix. The IRS is pretty picky. First, you have to choose between deducting state and local income taxes or state and local sales taxes. You can't do both. If you live in a state with no income tax, like Florida or Texas, the sales tax deduction is your best friend. You can either keep every single receipt (which sounds like a nightmare) or use the IRS optional sales tax tables based on your income and location.
Then there are the property taxes. These must be "ad valorem." That’s a fancy Latin way of saying "based on the value of the property." If your local municipality charges a flat fee for trash collection or a "sidewalk assessment" that isn't based on how much your house is worth, you generally can't include that in your SALT write off. It has to be the actual real estate tax.
Personal property taxes count too. You know that annual fee you pay to register your car? In some states, part of that is based on the car’s value. That specific portion is deductible. But the flat registration fee? Nope.
The "Workarounds" and the PTE Tax
Taxpayers are creative. Governors in high-tax states are even more creative. When the $10,000 cap hit, states like Connecticut and New Jersey started looking for loopholes. One of the most successful is the Pass-Through Entity (PTE) tax.
If you own a small business—like an S-Corp or an LLC—this is huge. Basically, the business pays the state tax directly instead of the owner paying it personally. Because the business is paying it, it counts as a business expense. Business expenses aren't subject to the $10,000 SALT cap. The IRS eventually blessed this move, and now over 30 states have some version of it. It’s a legal way to bypass the cap, but it requires some serious accounting legwork.
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Is the SALT Write Off Going Away?
The current rules under the TCJA are set to "sunset" at the end of 2025. That means if Congress does nothing, the $10,000 cap disappears on January 1, 2026. We would go back to the old system where the deduction was unlimited.
But don't hold your breath.
The political landscape is messy. Some argue that the cap is a "blue state penalty." Others argue that an unlimited deduction is just a "handout for the wealthy." The reality is somewhere in the middle. According to data from the Tax Foundation, the vast majority of the benefit of an unlimited SALT deduction goes to the top 20% of earners. However, many "regular" families in high-cost-of-living areas feel squeezed by the cap because their property taxes alone exceed $10,000 before they even get to their income tax.
Common Mistakes When Claiming the Deduction
People mess this up all the time. One of the biggest blunders is trying to deduct "foreign" real estate taxes. You used to be able to do that, but not anymore. If you have a villa in Italy, those property taxes aren't helping your U.S. federal tax bill.
Another mistake? Forgetting about the Alternative Minimum Tax (AMT). Even if you have a huge SALT write off, the AMT might kick in and claw back some of those benefits. The AMT is basically a parallel tax system designed to make sure wealthy people pay at least a certain amount, and it doesn't play nice with state tax deductions.
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Real World Example: The "Two-State" Problem
Imagine Sarah. She lives in New Jersey but works in New York City. She pays New York income tax on her salary and New Jersey property tax on her home. Her NY income tax is $12,000 and her NJ property tax is $15,000. Total state and local taxes: $27,000.
Without the cap, Sarah could subtract $27,000 from her federally taxable income. With the cap, she gets $10,000. That’s $17,000 of income that she is being taxed on twice. For someone in her shoes, the SALT write off isn't some abstract policy—it’s the difference between a new car or a bigger retirement contribution.
Strategies for Maximizing Your Benefit
If you’re bumping up against that $10,000 limit, you have to be smart. You can't change the law, but you can change how you manage your finances.
- Bunching Deductions: This is a classic move. If you are close to the standard deduction, you might "bunch" your property tax payments. Pay your 2024 Q4 taxes in December and your 2025 Q1 taxes also in December. This might push you over the standard deduction threshold for one year, allowing you to actually use the $10,000 SALT limit effectively.
- Check Your Business Structure: As mentioned, the PTE tax is a game-changer for freelancers and entrepreneurs. If you’re a 1099 worker or own a firm, talk to a CPA about whether electing to pay tax at the entity level makes sense.
- Charitable Contributions: While not directly part of the SALT cap, increasing your charitable giving can help you reach the threshold where "itemizing" becomes better than taking the "standard deduction." If you don't itemize, the SALT write off doesn't help you at all.
The Standard Deduction vs. Itemizing
This is where most people get confused. You only get the SALT write off if you itemize your deductions on Schedule A. For the 2024 and 2025 tax years, the standard deduction is quite high (around $14,600 for individuals and $29,200 for married couples).
If your total deductions—including SALT, mortgage interest, and charity—don't add up to more than the standard deduction, the SALT cap doesn't even matter to you. You're better off taking the flat standard amount. Most Americans (about 90%) now take the standard deduction, which is why the SALT debate mostly centers on homeowners in specific geographic regions.
Final Actionable Steps
Dealing with taxes is never fun, but being informed helps you avoid leaving money on the table. If you want to handle your SALT write off correctly, do these three things right now:
- Review your property tax statements: Ensure you aren't including non-deductible fees like trash, sewer, or specific local assessments that aren't based on home value.
- Run a "Sales Tax vs. Income Tax" comparison: If you bought a major item this year—like a boat, a car, or an engagement ring—the sales tax deduction might actually be higher than your state income tax deduction. Most tax software will do this for you, but keep those big-ticket receipts just in case.
- Consult a professional if you own a business: The PTE tax elections have strict deadlines. If you miss the window to elect into the state-level business tax, you're stuck with the $10,000 cap for another year.
The tax code is constantly shifting. Whether the SALT cap stays, goes, or gets raised to $20,000 (a popular compromise proposal), staying on top of your state and local payments ensures you won't be surprised when April rolls around. Keep your records clean and your expectations realistic.